Insight: On welfare reform, French resistance

Sep 21, 2011, 12:59 a.m.

PARIS (Reuters) - In a cozy bachelor pad on the Paris Left Bank, Georges, a 26-year old would-be advertising executive, exhales cigarette smoke and describes how he games the French welfare system.

For up to four months every year -- the time required to become eligible for unemployment benefits -- Georges works as a waiter or bartender, earning 3-4,000 euros ($4,000-5,500) a month. Then he arranges to be laid off, amicably if possible. For the rest of the year he pockets unemployment benefits worth 54 percent of his pay and makes up the difference by working -- off the books -- in bars and restaurants.

"It's crazy," he says. "I have two arms, two legs, there's no reason I shouldn't be working. But the way the system is set up, there's just no incentive to do it all the time."

By at least one measure, France has the most generous welfare system in the world. The state spends more than 20 percent of GDP on social benefits a year, or more than 500 billion euros ($700 billion). Benefit fraud cost the country 20 billion euros in 2010, according to a bi-partisan parliamentary report in June. That is about two-thirds of the social security system's budget shortfall, which is expected to reach 30 billion euros in 2011. The social security deficit is a big part of France's public deficit, measured at 148.8 billion euros in 2010.

An August 2011 online poll by the Metro free paper showed 68 percent of French people want welfare beneficiaries to be tracked more closely. Now French politicians say it is time to get serious. In April, President Nicolas Sarkozy launched a campaign to go after welfare cheats. The government is drawing up a national register of all welfare recipients to make it easier to target people collecting benefits illegally. Some politicians have even suggested that people who collect a subsidy designed to help jobseekers find work known as the revenu de solidarite active (RSA) should be forced to make some sort of active contribution in return.

But true reform will be difficult. In France, rich and poor alike exploit opportunities for gain, even illegal ones. From bosses who dodge social fees to workers who want more paid holiday when it suits their schedule, it sometimes can seem as if the whole society is bending the rules. At the same time -- and despite the polls -- accusing people in public is widely seen as distasteful. Politicians may talk about a crackdown but they also know they cannot be seen to hurt the poor. Dominique Tian, a deputy in Sarkozy's center-right UMP party and one of the authors of the report on benefit fraud, goes as far as to call it a French taboo.

"Our country is less permissive than our neighbors to the south, but at the same time, we French are fond of our contradictions," says Jean Mallot, a socialist member of the parliamentary commission looking into ways of toughening defenses against fraud. "People scream and shout about what they see as criminal behavior, but are tolerant when it comes to the small things."